Pay-for-Performance:
At Last or Alas? |
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By
Michael
J Pentecost, MD
What
a lovely phrase ... pay-for-performance. For those who toil harder,
work smarter, go the extra mile, satisfy customers, follow the rules,
comply with regulations--the surest incentive of all--more money on
payday.
The underlying
principle of pay-for-performance compensation, now the rage in health
care, is the creation of financial incentives that reward quality-improving,
cost-saving, and more efficient behavior by medical professionals.
For many
in health care, the question is not why now, but rather what took
so long with this pay-for-performance? Isn't it about time that someone
recognized the quality work of physicians and hospitals? After all,
for years everyone has known that a fee schedule that rewards volume
will result in ... more volume. Therefore, isn't it a no-brainer that
a payment mechanism that compensates clinical excellence will lead
to better quality? What's not to like?
Barely
five years old, a myriad of different pay-for-performance strategies
have already spread from New England to California, and the notion
has been embraced by hospitals, physicians, health plans, and employers,
particularly large corporations. Medical journals, management literature,
the lay press, government leaders, and CEOs all tout the concept as
a solution to the ills of health care.
But does
pay for performance, long the mantra of corporate America, offer a
realistic means for improving quality and efficiency in health care?
Or is this another ill-conceived strategy that falls flat on the way
from bench to bedside? Will pay for performance be the answer to national
concerns regarding rising health care costs and uneven quality in
medicine? Or will this payment mechanism founder in a sea of complexity,
imperfect data and provider pessimism?
Pay-for-performance
made it to Main Street commerce in the 1990s when it emerged as the
model for executive compensation, especially in publicly traded, for-profit
companies. The idea was logical enough: senior management would have
their pay (in the form of salary, equities, or bonuses) tied to quantitative
outcomes such as earnings or stock price--presumably a win-win strategy
for shareholders and company officials.
Though
mentioned in health care management circles as early as 1985, the
pay-for-performance movement did not really get going until the creation
of the Leapfrog Group in 2000. Prompted by the 1999 Institute of Medicine
report1 about the parlous state of quality in American
medicine, companies such as General Electric, IBM, General Motors,
and Boeing launched Leapfrog with an original mission of disseminating
information about quality and fashioning a payment mechanism that
rewarded value and efficiency.
Leapfrog
quickly settled on three standards for judging hospitals: computerized
physician order entry, full-time intensivist staffing of ICUs, and
referral to hospitals with high-volume surgical practices. Hospital
compliance with these voluntary standards is published annually in
the group's Hospital Quality and Safety Survey.
While
tangible benefits for complying with these guidelines have been limited,
some hospitals in New York have been given bonuses for meeting the
standards, and in Seattle employees have had copayments waived at
cooperating institutions.
A second
major project began in 2003 when Premier, Inc, a medical center purchasing
alliance, partnered with Medicare in a pilot project to improve quality
in more than 300 member hospitals. The trial involves following patients
with myocardial infarction, knee and hip replacement, congestive heart
failure, community acquired pneumonia, and coronary artery bypass
surgery.
As an
example, in orthopedic surgery patients, outcomes such as antibiotic
usage in the perioperative period, post-operative bleeding, and readmissions
within 30 days will be measured. In coronary artery bypass patients,
rates of internal mammary grafts and inpatient mortality will be assessed.
For the
first time, there was an explicit financial incentive for participation.
Hospitals in the top 10% will receive an additional 2.0% in payments,
the second 10% will earn an extra 1.0%, while the lowest 10% can be
docked as much as 2.0%.
Bridges
to Excellence, originated by General Electric in 2003, goes one step
further than Leapfrog by creating a financial bonus system for physicians,
at least as pertains to caring for patients with diabetes and heart
disease. By adhering to National Committee for Quality Assurance guidelines,
a physician can earn $80 for diabetic and $160 for heart patients
per year. The guidelines are straightforward--for example, monitoring
lipids, blood pressure and renal functions in patients with diabetes;
smoking cessation; and antithrombotic use in cardiac patients.
From
its origins in New England, Bridges has now spread across the country
as the product has been licensed nationally to insurers including
BlueCross BlueShield, Cigna, and United Healthcare.
While
all these initiatives provided a boost for the pay-for-performance
movement, the whole landscape for physicians was jolted recently when
the 2000-pound gorilla, namely Medicare, got into the game. On February
1, 2005, Mark McClellan, MD, an economist/internist and the Director
of the Center for Medicare and Medicaid Services (CMS), announced
that ten physician groups would be enrolled in a pay-for-performance
trial, dubbed the Medicare Physician Group Practice Demonstration.2
These
practices included the Geisinger Health System in Pennsylvania, Dartmouth-Hitchcock
in New Hampshire, Deaconess Billings in Montana, Forsyth in Winston-Salem,
the University of Michigan Faculty Group Practice, and others. Unlike
the Premier experiment, which involved only technical or hospital
fees, this new venture would put physician revenue at risk.
Each
group will have a different area of concentration. For instance, Geisinger
will emphasize the use of its electronic medical record to improve
access to health care information among Medicare beneficiaries in
rural Pennsylvania. Other participants will optimize treatment of
patients with diabetes, congestive heart failure, hypertension and
COPD utilizing means such as home care, preventive health, and disease
management programs.
Other
programs have arisen that share a similar philosophy. In California,
the Integrated Healthcare Association, formed in 1994 by six health
plans encompassing over seven million members, is unique in its incorporation
of patient satisfaction into the bonus formula for its pay-for-performance
initiative. In 2004, more than $50 million was distributed on the
basis of clinical quality (50%), patient satisfaction (40%) and computer
investments (10%). (Kaiser Permanente initially played an advisory
role only, because the medical group incentive payments did not fit
with its integrated health plan-medical group structure. However,
the two California Permanente Medical Groups began reporting data
on clinical and satisfaction measures to the IHA initiative in 2005
and 2006.)
Hospital
Compare, a cooperative effort of CMS, the Department of Health and
Human Services, and the Hospital Quality Alliance, was introduced
in April 2005 to provide the public with quality metrics from every
American hospital on their outcomes in patients with myocardial infarction,
congestive heart failure, and pneumonia.
So as
all these projects show, the pay-for-performance movement is not only
alive and well, it's growing. Nonetheless, legitimate concerns have
arisen, generally centered on the programs' effectiveness, durability
and fairness. Such issues include:
Stifling Innovation
In nonmedical
industries, with their vastly larger experience, one of the major
worries about pay-for-performance programs has been about overvaluing
the status quo and underinvesting in new initiatives.3
A company might find it easy to measure and reward established, easily
quantifiable outputs such as sales, but what about strategic planning
or new product development? A medical practice can easily tabulate
the RVUs for routine CTs of the abdomen, but who pays for the time
and effort to develop virtual colonoscopy? Are the short-term gains
of increased activity in these conventional areas coming at the expense
of a company or medical practice's future?
Undervaluing
Teamwork
The new
Medicare Physician Group Practice Demonstration proposes paying physicians
more for better results in treating patients with congestive heart
failure, asthma, diabetes, depression, and other conditions. And in
the descriptions of the individual project goals, much emphasis is
placed on collaborative care. Yet no mention is made about compensating
other members of the health care team--not nurses, technologists,
therapists, pharmacists--no one but physicians. In a profession where
virtually no task is performed alone, how will this be justified?
What will be the impact on the morale and professionalism of valued
colleagues?
Exploiting
the System
In the
Hospital Compare database, facilities are compared on the basis of
the time between the diagnosis of pneumonia and the initiation of
antibiotic therapy. Who makes the call on the diagnosis of pneumonia?
The paramedic? Senior resident? Attending? Does someone in the emergency
room trigger a stop watch? What about patients with other infections?
Will hospitals shortchange other patients with urinary tract infections,
meningitis, or bronchitis in their race to beat the clock?
Although
this may seem like a frivolous scenario, teasing out a subgroup of
patients for analysis does raise questions about extrapolation of
the data to an entire hospital population.
Selection
Bias
Benchmarking,
which is at the core of pay-for-performance, is not without its limitations.
As discussed recently by Denrell,4 in the absence of a
carefully monitored setting such as a controlled experiment, corporate
data is frequently not collected in a rigorous manner. Quite the contrary.
In commerce, successful businesses are happy to answer surveys about
their triumphs, but the unsuccessful companies--those whose ideas
failed--are out of business and no longer around to respond. So, like
Lake Wobegon, only above-average results are tabulated.
In medicine,
this phenomenon corresponds with the well-accepted fact that investigators
frequently do not publish negative results.
Fragmentation
Most
community physicians practice at more than one hospital, and nearly
all participate in multiple insurance plans. As noted by Epstein,
et al,5 if only 1% of an internist's patients were in the
Bridges to Excellence program, the annual bonus would be $1265, hardly
worth the paperwork necessary to enroll. If each pay-for-performance
program necessitates an incompatible information system, this could
pose an insurmountable burden, particularly to small practices.
Winners and
Losers
Behind
the headlines about pay-for-performance, some morning-after realities
are not so pleasant, specifically zero-sum accounting, better known
as winners and losers.6 While everyone's first take may
be more money for better results, with budget neutrality that also
means less money for those on the wrong side of the bell curve.
For example,
in the Premier trial, hospital reimbursements could vary from plus
2.0% to minus 2.0%. If Medicare patients were a third of hospital
admissions, as is frequently the case, being on the wrong side of
that swing could be disastrous, especially in an industry where 4%
margins are the stuff of dreams.
Further,
will the very hospitals struggling to keep up with information system
investments and human resource needs be the ones receiving less compensation?
Very likely--thereby raising a multitude of questions about equity
and access over the long term.
Provider Acceptance
The Leapfrog
Group was the first out of the blocks in the pay-for-performance movement,
so their standards would seem likely to be the most accepted. Perhaps,
but a query into hospitals within 100 miles of downtown Washington,
DC reveals only two institutions, Johns Hopkins in Baltimore and Christiana
in Delaware, that had fully responded to their surveys.
Why so
limited? In a recent analysis,7 Galvin, et al, identified
a number of factors including the voluntary nature of hospital surveys
and the unrealistically high expectations by Leapfrog's founders.
Further, computerized physician order entry and intensivist staffing
are expensive and, without tangible returns, hospital executives were
reluctant to invest in these programs. And is it realistic to expect
that low-volume surgical hospitals are going to rush to answer a survey
that recommends diverting their patients to a higher-volume facility?
Impact on
the Disadvantaged
Socioeconomic
status has been shown to have a strong correlation with HEDIS scores.8
That is, the poor are much more likely to have lower baseline scores
on measures such as breast, cervical, and colorectal cancer screening,
hypertension control, and immunization rates. From so far back in
the pack, how likely is it that these populations will meet the lofty
targets of most pay-for-performance programs? No doubt, very improbable.
And where is the fairness in financially punishing the physicians
and hospitals who care for these patients?
The arguments
for pay-for-performance are persuasive, and few believe that trials
of the methodology are out of order. But many outputs of the health
care industry are difficult to define, much less measure. The everyday
bazaar of a hospital represents a delicate equilibrium between business
and benevolence, empiricism and instinct, complexity and simplicity.
The current metrics of pay-for-performance are, by any standard, rudimentary--so
elementary as to raise doubts about their real impact or the long-term
buy-in by physicians and hospitals.
Edited
and reprinted from the Journal of the American College of Radiology,
V2(8), Pentecost MJ, Pay for performance: At last or alas?, 655-8,
©2005, with permission from American College of Radiology. www.jacr.org
References
- Institute
of Medicine, Committee on Quality of Health Care in America. Kohn
LT, Corrigan JM, Donaldson MS, editors. To err is human: building
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www.nap.edu/openbook/0309068371/html/.
- Wessel
D. Rx for health care may include carrots. Wall Street Journal 2005
Feb 3;Sect A:2.
- Day
JD, Man PY, Richter A, Roberts J. Has pay for performance had its
day? McKinsey Quarterly [serial on the Internet]. 2002 [cited 2005
Dec 21];(4). Available from: www.mckinseyquarterly.com.
- Denrell
J. Selection bias and the perils of benchmarking. Harv Bus Rev 2005
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- Epstein
AM, Lee TH, Hamel MB. Paying physicians for high-quality care. N
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JH. The emerging role of pay-for-performance contracting for health
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RS, Delbanco S, Milstein A, Belden G. Has the Leapfrog Group had
an impact on the health care market? Health Aff (Millwood) 2005
Jan-Feb;24(1):228-33.
- Zaslavsky
AM, Hochheimer JN, Schneider EC, et al. Impact of sociodemographic
case mix on the HEDIS measures of health plan quality. Med Care
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